Saturday, 11 June 2005

Economics for the citizen

Fans, foes or friends of Austrian economics might enjoy a series of recent lectures by Joseph Salerno, which are available online at the Mises site. Wow. Don't worry, there's plenty of reading recommendations and online reading as well -- the equivalent of a whole university level course if you want to follow it through. And yes, Ruth, there's two lectures on gold which should make you very happy.

If that's a little much for you on a weekend, but you still want some economic learning, Walter Williams has a short series of ten articles comprising "a few lectures on basic economic principles to my readership. We'll name the series 'Economics for the Citizen.' The first lesson in economic theory is that we live in a world of scarcity..." Here it is.

6 comments:

I don't disagree with most Austrian Economics - just the obsession with gold. I had a quick look at one of the essays..

So the guy goes on about pegs failing - as they always do - what else is gold but a peg? Why gold - why not sea-shells? The 'value' of gold is akin to the value of personalised number plates.

"The eminence of the gold standard consists in the fact that it makes the determination of the monetary unit’s purchasing power independent of the measures of governments. It wrests from the hands of the “economic tsars” their most redoubtable instrument. It makes it impossible for them to inflate. (Mises 1980, p. 480)"

This has always been their main argument. Inflation is dead worldwide and gold has had nothing to do with it. So they seem to be changing horses mid-race and now calling DEflation. Give me a break. It wasn't inflation, deflation or stagflation - Greenspan's REflation has worked.He is going to go down in history as the world's greatest central banker. If you have Thomas Sowell's Basic Economics you will see he says the same thing as me about the gold standard being obsolete.

It is scary that Austrians think like this:

"We no longer send armies to plunder and loot foreign lands of their gold and silver. Now, we send bankers. Instead of sending our armies we now send the peoples of the world our bankers and our computer entries (with no intrinsic value) and with no tangible substance... To the rest of the world, the 'ugly American' is a banker with a computer... the bankers are criminally plundering their purchasing power and creating decades of countless deaths by starvation throughout the world."http://www.gold-eagle.com/editorials_01/atocha112601.html

As I've said before, 'gold bugs' and advocating a gold standard are two different things entirely. Unfortunately however the two have become confused in some minds, including yours it seems, because it seems many dodgy investment crowds and gold but organisations promote faux-Austrian or faux-libertarian rationales for people to give them their money -- organisations like for example the 'John Galt Society', to whom Rodney Hide and Dave Henderson spoke in Fiji a couple of years ago.

To judge Austrian economics by the standards of nutters like the JGS or gold-eagle.com is hardly fair -- it's like judging Ayn Rand by looking at Peter Schwartz.

Those who advocate a gold standard and those who are gold bugs are exactly the same. I am not confused. *you* are confused - not me. This is one matter which still has the ability to aggravate me - so I'm not going to post here anymore - you reality-challenged old goat. You have not answered any of my questions about gold - because you can't. Gold eagle gets like 1 million hits per week. They are exactly the same as Mises - and my ex-biatch lost all his money - including his house, by listening to their doomsaying prophecies. US was going to be like Argentina right??

Ruth, you said, "Those who advocate a gold standard and those who are gold bugs are exactly the same."

Well, like many others I am the former, but not the latter. No confusion there. I applaud your lack of disagreement with most Austrian economics, but I wonder what’s got your goat about gold that makes it such an obsession?

“Gold Eagle’ don’t’ speak for me, and I neither know nor care what they‘ve said, say or undertake to predict. As far as I’m concerned 'Gold eagle' can keep getting their hits without my support. I have no idea what they've said about the US, about Argentina or about your "ex-biatch," and I'm afraid I could care less.

"You have not answered any of my questions about gold ..."

I hadn't yet seen a substantive question from you about the value of an objective standard for currency, or an argument for why fiat currency backed only by govt promises is so much better. Because that's your choice: either commodity money, or fiat money; either your currency is backed by gold or some other objective standard, or it is backed by a politicians' promises and the skill and capacity for political independence of its central banker.

You say, "So the guy goes on about pegs failing - as they always do - what else is gold but a peg?" What else is a precious metal but a store of value. A gold or a precious metal standard is not a 'peg' as you call it, as unlike a fixed ‘peg’ the quantity of gold produced tends to increase as levels of productivity increase. unless govts themselves set a 'fixed price' for gold, which Reisman, Salerno and others argue they shouldn't.

'Why not sea-shells?' Sea-shells and cowrey shells were indeed once a monetary standard in primitive societies, but for a number of pretty obvious reasons gold and silver eventually won out. Sea-shells are not valued as highly as gold, nor as rare, nor as portable or as durable, nor are they as homogeneous or as easily divisible. Gold and silver won out over sea-shells and other commodities, and were only 'bested' by government's eventually passing laws to allow themselves to print currency and making it illegal to hold gold as a store of value. You took issue with Mises's statement that "It wrests from the hands of the “economic tsars” their most redoubtable instrument. It makes it impossible for them to inflate," saying "this has always been their main argument. Inflation is dead worldwide and gold has had nothing to do with it." But the main argument for a gold standard is not that it is anti-inflation per se, it is that it precludes govt tampering with the currency in order to achieve political ends, one of which has in the past been to inflate.

You've focussed on the one word, 'inflation,' and forgotten Mises's previous sentence, to whit "The eminence of the gold standard consists in the fact that it makes the determination of the monetary unit’s purchasing power independent of the measures of governments." That is its chief virtue. It frees the currency from politicians’ promises.

Ruth clearly doesn't understand what it means to 'peg' a currency in a true gold standard. The names we currently use for that fiat garbage used to be names for weights of gold and silver. They aren't 'pegs' - you might as well say let the definition of an 'ounce' fluctuate freely as anything else would be an undesirable weight-fixing peg.And as for "Inflation is dead worldwide" well that gave me the best laugh I've had in ages. For instance I can no longer afford a house in most western countries. Oh but of course. Ruth would only accept the definition of 'inflation' that those kindly gentlemen and ladies in power supply to her. To question them or look at the reality of what's actually happening would only be the domain of extrememists and Austrians wouldn't it Ruth.

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